Correlation Between Smallcap Value and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Smallcap Value and Commodities Strategy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Smallcap Value and Commodities Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Value Fund and Commodities Strategy Fund, you can compare the effects of market volatilities on Smallcap Value and Commodities Strategy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Smallcap Value with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Value and Commodities Strategy.
Diversification Opportunities for Smallcap Value and Commodities Strategy
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Smallcap and Commodities is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Value Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Smallcap Value is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Smallcap Value Fund are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Smallcap Value i.e., Smallcap Value and Commodities Strategy go up and down completely randomly.
Pair Corralation between Smallcap Value and Commodities Strategy
Assuming the 90 days horizon Smallcap Value Fund is expected to generate 2.18 times more return on investment than Commodities Strategy. However, Smallcap Value is 2.18 times more volatile than Commodities Strategy Fund. It trades about 0.28 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about -0.12 per unit of risk. If you would invest 1,210 in Smallcap Value Fund on September 4, 2024 and sell it today you would earn a total of 106.00 from holding Smallcap Value Fund or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Smallcap Value Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Smallcap Value |
| Commodities Strategy |
Smallcap Value and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Value and Commodities Strategy
The main advantage of trading using opposite Smallcap Value and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Value position performs unexpectedly, Commodities Strategy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Smallcap Value vs. Commodities Strategy Fund | Smallcap Value vs. Rbc Emerging Markets | Smallcap Value vs. The Emerging Markets | Smallcap Value vs. Black Oak Emerging |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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